Tuesday, October 31, 2017

Approximately 52,000 Americans died from opioid overdoses in 2015. That's an average rate of around 140 deaths a day. In fact, opioid overdose is now the leading cause of death for Americans under age 50. If we continue at this rate, a half million Americans will die from drug overdoses over the next ten years--roughly nine times as many Americans as were killed in the Vietnam War.

But let's compare the opioid crisis to the student-loan disaster. Last year, 1.1 million Americans defaulted on student loans; that's an average rate of 3,000 people a day. Obviously, defaulting on a student loan is not as serious as dying from a drug overdose. Nevertheless, the consequences of student-loan default are catastrophic.

First of all, a student-loan default triggers penalties and fees that are attached to the unpaid debt, making it less likely that the debtor will ever pay off his or her student loans. Secondly, student-loan defaulters cannot take out more student loans to obtain additional education or training. Third, unlike most unsecured loans, student loans are very difficult to discharge in bankruptcy.

In short, people who default on their student loans run a good chance of becoming lifetime debtors who will never improve their economic circumstances. In other words, a student-loan default is often the equivalent of an economic death sentence.

People who attend for-profit colleges have the highest student-loan default rates. A Brookings Institution report documented that almost half of the people in a recent cohort who borrowed money to attend a for-profit school defaulted within five years. Another analysis reported that three out of four African Americans who attended for-profit colleges eventually default on their loans.

In my opinion, a good case can be made that the student-loan catastrophe is causing more harm than the opioid epidemic. Around 44 million Americans have student-loan debt; that's about one American in five. College-loan indebtedness is hampering people's ability to buy homes, save for retirement, and purchase health insurance. Without question, millions of Americans would have been better off if they had never pursued postsecondary education because the indebtedness they took on degraded the quality of their lives rather than enhanced it.

And Secretary of Education Betsy DeVos has has made the student-debt crisis worse. Again and again, she has made decisions that favor the corrupt for-profit industry at the expense of struggling student loan debtors, even debtors who were defrauded by for-profit colleges.

To its credit, the Obama administration crafted regulations whereby students could apply to the Department of Education to have their student loans forgiven if they were defrauded by the college they attended. Thousands of students have applied for loan forgiveness based on fraud claims, including students who borrowed money to attend two bankrupt for-profit institutions: ITT Tech and Corinthian Colleges.

The Obama regulations were to have taken effect on July 1, 2017, but Betsy DeVos stopped the implementation of these regulations, saying she feared students would get "free money." She then appointed a panel of experts to draft new regulations, which won't be approved until next year. In fact, under the DeVos scheme, defrauded students will not be able to move forward on their claims until 2019 at the earliest.

And it appears that many students will not get complete relief from their loans even if they can prove they were defrauded. DeVos is talking about giving partial relief based on a formula that will compare the defrauded student's earnings to the average earnings among people who participated in similar educational programs.

The cynicism of this approach is shocking. First of all, by delaying the administrative process until 2019, DeVos is giving fraud victims only three options for handling their oppressive student debt. First, they can continue making loan payments on educational experiences that are worthless to them. Second, they can enter income-based repayment plans that will set monthly payments so low that the interest on their debt will continue to accrue, making their total indebtedness grow larger. Or third, they can default on their loans, which will ruin their credit and cause their debt to grow larger from fees and penalties that the debt collectors tack on to their original debt.

DeVos's tactic is nothing more than sneaky manipulation to aid the for-profit industry, which does not want fraud claims to be examined. If Congress had a moral compass and some courage, DeVos's behavior would lead to a formal resolution calling for her resignation.

Unfortunately, Congress is as beholden to the for-profit colleges as Betsy DeVos. The for-profits have used lobbyists and strategic campaign contributions to buy Congress's silence; and at least a few of our federal representatives (Senators Olympia Snowe and Dianne Feinstein, for example) have personally profited from ties to the for-profit college industry.

And thus our elected representatives are willing to allow millions of lives to be destroyed and the integrity of higher education to be degraded rather than reform the federal student-loan program. In sum, Congress is willing to tolerate human suffering that may exceed the harm caused by opioid addiction.

Friday, October 27, 2017

If I was ever to get into an academic research argument on the role of government, this would be the time. Frankly I’m just getting pissed off by the apparent disregard for student loan debtors by the Trump Department of Education. And before you react that this is a Trump reaction, it’s not. This is an outrage and embarrassment of the actions taken collectively against consumers and student when it comes to student loan debt.

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America. – Source

The last administration was trying to protect students from being misled by schools to enroll them based on false promises and employment assertions. That’s been significantly halted.

The previous administration expanded the Borrower Defense to Repayment program to allow students who had been defrauded by their schools a chance to have their loans forgiven and the loans clawed back from the schools. That’s been significantly halted.

The Consumer Financial Protection Bureau (CFPB) is suing Navient over poor student loan servicing and Navient says it has no duty to provide good advice to student loan debtors. The Department of Education is not participating in that fight by backing up the CFPB and in fact has said they will stop sharing information with the CFPB.

Now we will have to see what the Department of Education does next on this. The student loan lending industry is making the argument to the Department of Education they should not be subject to state probes into their industry. The position is the federal law and should prevent states from investigating the abusive practices of the student loan industry.

Just to show you how crazy this has all become, even Texas thinks this argument is crap and Texas has typically been the business comes first state.

“Joining a bipartisan coalition of 25 states, Attorney General Ken Paxton today called on U.S. Secretary of Education Betsy DeVos to reject a campaign by student loan servicers and debt collectors to dismantle state oversight of the student loan industry. In recent years, Texas and other states investigated and prosecuted a number of student loan industry abuses, winning settlements in the tens of millions of dollars for vulnerable student borrowers.

In a letter to Secretary DeVos, Attorney General Paxton and his counterparts point out that the student loan industry continues to lobby the U.S. Department of Education for more control and autonomy at a time when it is still in urgent need of reform.” – Source

If the Department of Education was doing anything to hold schools and lenders accountable for the massive levels of student loan debt issued with fraud and serviced with incompetence then maybe all of these events would not matter, because they would not happen or be allowed to continue.

But I’ve got an old expression for you: If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.

Thursday, October 26, 2017

Corinthian Colleges filed for bankruptcy in 2015, and ITT Tech went bankrupt a year later. Together, the two for-profit college companies left more than half a million students and former students in the lurch. Thousands of these victims filed so-called borrower-defense claims with the Department of Education, asking DOE to forgive their student loans on the grounds that they were defrauded.

The Obama administration approved regulations for processing these claims, but Betsy DeVos put them on hold. She was concerned, she said, that the Obama rules might give undeserving students "free money."

Now DOE has approved a panel of 17 experts to overhaul the Obama regulations. According to a story in Inside Higher Ed, the DeVos Department anticipates the new rules won't go into effect until 2019. Under that timetable, defrauded borrowers won't even have an avenue of relief until four years after Corinthian filed for bankruptcy.

Meanwhile, hundreds of thousands of student borrowers who attended one of the Corinthian schools, ITT Tech, and dozens of other dodgy for-profit colleges will be making monthly loan payments for worthless education experiences. Hundreds of thousands of others will put their loans into deferment, which will relieve them from making loan payments but will cause their loan balances to go up due to accruing interest. And thousands more will simply default, which will allow the federal government's sleazy loan collectors to slap on penalties and fees to their loan balances.

But DeVos doesn't give a damn about the carnage wreaked by the corrupt for-profit college industry. In fact, she is doing everything she can to prop it up.

And so, Betsy DeVos, Amway heiress and for-profit co-conspirator, lumbers along like a Galapagos tortoise, oblivious to the misery experienced by millions of student debtors--who are now defaulting at the rate of 3,000 a day.

Sunday, October 22, 2017

At age 40, Will Milzarski, an attorney, took leave from his state government job to return to the U.S. Army. After completing officer training, he served two tours of duty in Afghanistan. where he led more than 200 combat missions.

On his last day in combat, Milzarski was wounded in the face, which left him with a traumatic brain injury, hearing loss, and post-traumatic stress disorder. He was later determined to be totally disabled.

Milzarski returned to civilian life with $223,000 in student-loan debt, most of it acquired to obtain a law degree from Thomas M. Cooley School of Law. In accordance with its policy, the Department of Education forgave all of that debt due to Milzarski's disability status.

But then this wounded veteran received a surprise. The IRS considers forgiven debt to be taxable income, and thus it sent Milzarski a tax bill for $62,000.

Milzarski summarized his experience well. "One part of our government says, 'We recognized your service, we recognize your inability to work," Milzarski said. "The other branch says 'Give us your blood.' Well, the U.S. Army already took a lot of my blood."

Nearly 400,000 disabled Americans have student-loan debt, and this obscure tax provision impacts nearly all of them. Although they are entitled to have their student loans forgiven due to their disability status, this forgiveness comes with a tax bill.

And disabled student-loan debtors are not the only people affected by the IRS forgiven-loans rule. More than 5 million student-loan debtors are in long-term, income-driven repayment plans (IDRs), and most of them are making monthly payments so low that they are not repaying the accumulated interest.

Under the terms of all IDRs (there are several varieties), college borrowers who successfully complete their 20- or 25-year repayment plans are entitled to have any remaining debt forgiven. But IDR participants, like retired Lieutenant Milzarski, will get a tax bill for the forgiven debt.

Obviously, this state of affairs is insane. President Obama recommended a repeal of the IRS rule when he was in office, but nothing came of his suggestion.

Surely a bill to repeal the IRS forgiven-debt rule would receive bipartisan support in Congress. Who could decently oppose a repeal? In fact, President Trump can probably reverse the rule that is persecuting Mr. Milzarski simply by signing an executive order.

I predict, however, that that nothing will be done about this problem--either legislatively or by executive action. Washington DC is in so much partisan turmoil that almost nothing positive is getting done. Under current tax law, millions of student borrowers in income-driven repayment plans will have huge tax bills waiting for them when they complete their repayment obligations and have their remaining student-loan debt forgiven.

And unlike retired Lieutenant Milzarski, who is in his forties, most IDR participants will be in their sixties or seventies when their tax bills arrive in the mail. And if they can't pay their taxes, that will not be the government's problem. The IRS will simply garnish their Social Security checks.

Saturday, October 21, 2017

The National Center for Education Statistics issued a report in early October on long-term, student-loan repayment patterns, and two independent analyseshighlighted the loan repayment patterns for African Americans. Almost half of all black students who entered postsecondary education in 2003-2004 (49 percent) had defaulted on at least one of their student loans within 12 years.

Think about this statistic for a moment.

The consequences of defaulting on a student loan are catastrophic: a ruined credit rating and a ballooning loan balance due to penalties, collection fees, and accelerating interest. Individuals who default on their student loans will be crippled in their ability to buy a home, marry, have children, or save for retirement. And bankruptcy relief, although not impossible, is very rare for student-loan debtors. In short, most people who default on their student loans will be burdened by their debt for the rest of their lives.

Who would construct a student-aid system that ruins the lives of half the African Americans who participate in it?

And the story gets worse. Three out of four black students who took out student loans to attend a for-profit college and then dropped out defaulted within 12 years. In essence, African Americans who borrow to enroll in a for-profit institution and don't finish their programs are playing Russian roulette with their financial futures--Russian roulette with three bullets in a four-shot revolver.

As an Inside Higher Ed article noted, the Department of Education "has not collected much data on student debt that can be broken out by the race or ethnic background of borrowers." Why not? Because DOE does not want the public to know that African American are getting ripped off by the higher education industry--and the for-profits, in particular.

The historically black colleges and universities (HBCUs) benefit from the status quo, the for-profit industry benefits from the status quo, and Congress benefits from the status quo because our legislators take campaign contributions from entities that depend on federal student-aid dollars--including the private equity funds that own some of the for-profit colleges.

Will these recent reports, which highlight racial exploitation in higher education, bring about change? I seriously doubt it. Everyone who is profiting from the federal student-aid program is playing a short game. The insiders want to make as much money as they can before higher education collapses--and collapse is fast approaching.

Sunday, October 15, 2017

Awhile back I wrote about
California's legislative travel ban, which bars state-funded travel
to states that passed so-called unprogessive legislation. Eight
states are now on that list, including Texas and North Carolina.

At
the time I wrote, I considered California's travel ban to be
arrogant, self-righteous, and gratuitous. But that was before the
Harvey Weinstein scandal and the Napa-Sonoma wildfires. Now I
consider the travel ban to be pathetic.

People who live in
flyover country have grown accustomed to being reprimanded by
the California entertainment elites--all those beautiful people who
are so cool and sensitive. We've endured public scoldings from the
California legislature, which passed a law that
bars state-funded travel to eight of California's sister
states.

And now we find that Hollywood, the capital of
coolness, has been enabling a sexual predator and accused rapist for
decades. Everyone in the movie business knew Harvey Weinstein was
preying on vulnerable women. His own company knew; in fact Harvey's
employment contract contained a clause obligating Weinstein to
reimburse his employer for future sexual abuse lawsuits (he
had already settled with eight accusers) and to pay escalating
penalties for future sexual assault complaints.

And then came
the Napa-Sonoma wildfires, which have killed at least 40 people and
scorched 350 square miles of the California wine country.
Firefighters are pouring in from all over the United States to
help fight these fires--including firefighters from North
Carolina, which is under California's travel ban.

Do you think
the California legislature will bar North Carolina fire crews from tackling
the blaze in the Napa Valley? No, of course not. California's politicians want
all the help the state can get to put out the deadliest wildfire in
California history--even help from insensitive North
Carolinians.

Do you think Hollywood will ask the folks in
flyover country to boycott all the movies associated with
Harvey Weinstein? No. The movie industry depends on the rubes to buy
movie tickets and $10 popcorn. Puh-leeze buy a ticket to see all the
movies Harvey Weinstein and his cronies vomited into American
culture.

Do you think any of Hollywood's supercilious, pompous
asses will apologize to middle America for all the judgmental
lectures they delivered while they covered up the Weinstein scandal?
No, I don't think so.

But it is not my purpose to scold
Hollywood or California politicians now that the Golden State's
hypocrisy has been exposed. I don't wish to descend to the level of
Alex Baldwin.

No, I wish to evoke the spirit of Woody
Guthrie, the great folk singer and Dust Bowl refugee who
migrated to California during the Great Depression, back in the
days when California state troopers turned Okies away at the
state border.

"This land is your land,"
Guthrie sang. "this land is my land.

From the California to the New York island

From the Redwood Forest

To the Gulf Stream watersThis land was made for you and me.

So this is my message to California:

We, the people of flyover country, grieve for you as you battle the Napa-Sonoma wildfires, and fire crews from all over America will come to help. We'll even continue watching the retched movies that Hollywood grinds out ever year.

But here's the thing: This land is not just your land. It's our land. It was a land made for all of us. So let's all be a little more tolerant toward one another.

Thursday, October 12, 2017

I live a couple of blocks from Louisiana State University, and I occasionally visit the campus book store. Or I should say I visit the Barnes & Noble book store that operates on the LSU campus.

As I walked in a few days ago, I noticed a large stack of plastic water bottles, all bearing the LSU logo. How much does such a water bottle cost, I asked myself? I discovered there are two versions. The basic plastic water bottle is priced at $25 and the premium bottle costs 27 bucks. Actually, the premium bottle costs almost $30 because the buyer also pays a 10 percent sales tax.

Thirty dollars for a plastic water bottle!

The campus bookstore also has a coffee bar that sells Starbucks coffee for about four bucks a pop. Incidentally, the coffee bar is not owned by Starbucks so you can't use your Starbucks gift card there to buy your Starbucks coffee.

But that's OK because most students have debit cards, which they whip out to pay for everything. And how are students paying for $30 water bottles and four-buck exotic coffee? With student loans, of course.

But the expensive items at the Barnes & Noble bookstore are small beer. LSU recently completed a $85 million leisure project that includes a a 645-foot "lazy river" water feature shaped in the letters LSU.

Mercilessly ridiculed for constructing this monstrosity, LSU officials solemnly defended the project. "I will put it up against any other collegiate recreational facility in the country when we are done because we will be the benchmark for the next level,"Laurie Braden, LSU's recreation director, said in 2015. I have no idea what that means.

LSU's world-class spa is conveniently located near LSU's fraternity houses, but the frat boys apparently are not visiting it enough. Nine members of Phi Delta Theta were indicted this week on charges of hazing after Maxwell Gruver, a freshman from Georgia, died of "acute alcohol intoxication" while at a drinking party.

Hazing is a crime in Louisiana, but the frat boys' lawyers insist that the drinking incident was not hazing. As a matter of fact, a fraternity member lured Gruver to the drinking site by directing him to report for "Bible study." And perhaps that is the proper description of an incident that left Gruver's system pickled with five times the legal amount of alcohol in his system.

In any event, what's the big deal? According to experts, Gruver "probably slipped out of consciousness and died without pain . . ., as if under anesthesia." And no one was charged with murder because, hey, college boys will be college boys.

Mr. Gruver's death will soon be forgotten. All that matters at LSU is football. LSU's stadium was expanded to seat 103,000 fans, including the high rollers who sit in air-conditioned executive suites and drink premium liquor while the plebeians sweat it out in the cheap seats.

Everyone wants to be associated with the LSU Tigers. In fact, the Tigers have an official personal-injury law firm by the name of Dudley DeBosier. What does it mean to be the LSU Tigers' official injury law firm? Dudley DeBosier explains it to us on its web site:

"Being the Official Injury lawyers of LSU Athletics means more to us than just a simple sponsorship," the firm assures us:

It means hot boudin, jambalaya, fried catfish, and more gumbo than you can eat. It’s thousands of smiling faces walking in between stately oaks and broad magnolias on a Saturday morning. It’s the sound of Tiger Stadium as you cheer on your team with 100,000 of your closest friends. It’s the traditions, tailgates, and everything else we love about Louisiana.

Got it. So if I get maimed on Interstate 10 by an 18-wheeler, I'm going to hire Dudley DeBosier to sue the trucking company because--well, Dudley DeBosier is LSU's official injury law firm.

Meanwhile, LSU is tearing down an old dorm and constructing new, more luxurious student housing. Some LSU officials feel that the students should live in at least as much splendor as Mike the Tiger--LSU's mascot, who resides in a "habitat" that looks like Club Med.

LSU officials say they are only providing all these amenities because this is what today's students demand. And indeed, the student body voted to pay for the lazy river with student fees. From the students' perspective, I suppose, the cost of going to college is immaterial. After all, everything is paid for with student loans; and if the costs go up, Uncle Sam and Wells Fargo are always there to loan students more money.

Wednesday, October 11, 2017

Shahien Nasiripour, writing for Bloomberg.com, wrote an article last month about rising student-loan delinquency rates. As of June 30th, 18.8 percent of student borrowers were at least one month late on their loan payments. That's about 3.3 million college borrowers.

The Department of Education's June report showed a slight uptick from the delinquency rate one year earlier, when 18.6 percent of student debtors were a month late on their loan payments.

What does this mean?

Yelena Shulyatyeva, a senior economist for Bloomberg Intelligence, professed to be mystified. "There's no fundamental reason for that to be happening," Shulyatyeva said.

James Kvaal, who was President Obama's Deputy Director of White House Domestic Policy, also seemed stumped by rising delinquency rates. "That the trend has stalled," Kvaal said, "is not yet a warning sign, but it is a question mark."

Nasiripour, who has done some fine reporting on the student loan crisis, summarized why this development is puzzling to many policy experts. "After all," she wrote, "the U.S. economy has improved since June of last year, with lower unemployment, higher household incomes and increased wealth, federal data show." Moreover, Nasiripour pointed out "Consumers are more confident about the economy, and their own personal finances, too, according to Bloomberg Consumer Comfort data."

But rising delinquency rates are just one more sign that the student loan program is in meltdown. Let's tick off some more disaster indicators:

Last year, 1.1 million Americans defaulted on their student loans at an average rate of 3,000 defaults a day.

A recent report released by the National Center for Education Statics revealed that almost 6 people in ten who first enrolled for postsecondary education in 1995-96 had not paid off their student loans 20 years later.

As reported by the Wall Street Journal, more than half the students at a thousand colleges and schools had not reduced their student-loan debt by one penny seven years into repayment.

According to a 2016 report from the Government Accounting Office, half the people who entered income-driven repayment plans to lower their monthly loan payments were removed from their IDRs for failing to recertify their income.

A Brookings Institution report noted that more than one out of four people (28 percent) in a recent cohort of student borrowers defaulted on their loans within five years of beginning repayment. The default rate among students who attended for-profit colleges was 47 percent.

Congress, the Department of Education, and the higher education industry refuse to face reality. I suppose all the people who should be addressing this crisis are hoping they will be retired and playing golf in Florida when the student-loan program collapses.

And collapse it will. In the meantime, millions of student-loan debtors are buried under a mountain of debt.

I believe the federal bankruptcy courts are slowly awakening to this crisis and that they are increasingly willing to rule compassionately toward distressed student debtors who seek bankruptcy relief. The Murray decision out of Kansas, which was affirmed on appeal last month, is a heartening sign.

The Murrays were fortunate enough to have been represented by an able attorney, and they also received assistance in the form of an amicus brief filed by the National Consumer Law Center and the National Association of Consumer Bankruptcy Attorneys.

Unfortunately, few insolvent student debtors are able to find attorneys to take their cases. If American lawyers understood the student-loan crisis for what it is--a human rights issue, they might take up some of these cases as volunteers, much as the civil rights lawyers did in the 1960s, when attorneys from across the United States came South at the risk of their lives to represent civil rights activists.

I am convinced that the solution to the student-loan catastrophe lies with the federal bankruptcy courts. Congress does not have the collective courage to address this problem legislatively, and the higher education industry--like a cocaine addict--survives from day to day on regular infusions of federal student-aid money.

American colleges, like drug addicts, survive from day to day on regular infusions of federal student-aid money.

Saturday, October 7, 2017

In a previous essay, I wrote about Alan and Catherine Murray, a married couple in their late forties who defeated Educational Credit Management Corporation in a Kansas bankruptcy court. ECMC appealed, and the Murrays prevailed again--a victory that has important implications for middle-income student-loan debtors.

The Murrays took out student loans in the 1990s to obtain undergraduate degrees and master's degrees. Their total indebtedness was $77,000, which they consolidated in 1996 at an interest rate of 9 percent.

Over the years, the Murrays paid $54,000 toward paying off these loans--70 percent of the amount they borrowed. But they obtained economic hardship deferments during periods of financial stress, which allowed them to skip some loan payments. And they entered into an income-based repayment plan to lower their monthly payments to a manageable level.

Although the Murrays handled their student loans in good faith, interest on their debt continued to accrue; and they made no progress toward paying off their debt. In fact, when they filed for bankruptcy in 2014, their loan balance had ballooned to $311,000--four times what they borrowed!

Judge Dale L. Somers, a Kansas bankruptcy judge, gave the Murrays a partial bankruptcy charge. It was clear, Judge Somers ruled, that the Murrays could not pay off their total student-loan indebtedness and maintain a minimal standard of living. And it was also clear that their financial situation was not likely to change. Finally, Judge Somers concluded, the Murrays had handled their student loans in good faith--an essential requirement for discharging student loans in bankruptcy.

On the other hand, Judge Somers determined, the Murrays could pay off the original amount they borrowed ($77,000) and still maintain a minimal standard of living. Thus, Judge Somers discharged the accumulated interest on the Murrays' debt, but required them to pay back the original amount they borrowed.

ECMC, the Murrays' ruthless creditor, appealed Judge Somers' decision. ECMC argued, as it always does, that the Murrays should be put in a long-term income-based repayment plan (IBR) that would last from 20 or 25 years.

But U.S. District Court Judge Carlos Murguia, sitting as an appellate court for the appeal, affirmed Judge Somers' decision. "The court agrees with Judge Somers' findings and conclusions that [the Murrays] made a good faith effort to repay their loans," Judge Murguia wrote.

Significantly, Judge Murguia, ruling in the capacity of an appellate judge, explicitly rejected ECMC's argument that the Murrays should be placed in an IBR and that none of the Murrays' $311,000 debt should be forgiven.

"The court disagrees," Judge Murguia wrote. "Under the circumstances of this case, debtors' payments under an IBR plan are insufficient even to stop the accrual of additional interest, and such payments directly contravene the purpose of bankruptcy." Judge Murguia noted that Judge Somers had not discharged all of the Murrays' indebtedness--only the accumulated interest. "He discharged that portion--the interest--that had become an undue hardship on debtors, denying them a fresh start."

ECMC v. Murray is an important case for two reasons: First, this is one of the few student-loan bankruptcy court decisions that have granted relief to middle-income student borrowers. The Murrays' combined income was about $95,000.

Second, the key ruling by both Judge Somers and Judge Murguia was their finding that the interest on the original debt would constitute an undue hardship for the Murrays if they were forced to pay it back. Furthermore, this would be true even if the Murrays were placed in an IBR because the monthly payments under such a repayment plan were insufficient to stop the accrual of interest.

There are hundreds of thousands of people in circumstances very similar to the Murrays. Their loan balances have doubled, tripled or even quadrupled due to accumulating interest. People in this situation will never pay off their total indebtedness. But most of these people, like the Murrays, can pay off the amount they originally borrowed if only the accumulated interest were wiped out.

Let us hope student loan debtors situated like the Murrays will learn about ECMC v. Murray and find the courage to file bankruptcy and seek a discharge of their student loans--or at least the accumulated interest. After all, it is the accumulated interest, penalties and fees that have put millions of student borrowers in a hopeless situation. The Murray decision offers a fair and reasonable solution for these people and gives them a fresh start. A fresh start, after all, is the core reason that bankruptcy courts exist.

Friday, October 6, 2017

James Howard Kunstler posted a blog last week in which he challenged Congressional Democrats to introduce legislation to counteract the effect of Citizens United v. Federal Election Commission, 558 U.S. 310 (2010). In that case, you may recall, the Supreme Court ruled that corporations can give as much money as they like to political campaigns. All sensible people agree that Citizens United triggered a new level of corruption in national politics as corporations pump millions of dollars into Congressional campaign coffers in order to protect their venal interests.President Obama complained publicly about Citizens United while he was in office. But he didn't do anything about it, even though he could have ameliorated its effect through legislation when the Democrats controlled the Senate and the House of Representatives.Democrats can still put a Citizens United override on their legislative agenda as Kunstler challenged them to do:

That’s your assignment Chuck Schumer, Nancy Pelosi, and the rest of the Democratic Party leadership. Get serious. Show a little initiative. Do something useful. Draw up some legislation. Get behind something real that might make a difference in this decrepitating country. Or get out of the way and let a new party do the job.

And of course there are plenty of other things the Democrats can do to promote fairness and justice in our society. As Gretchen Morgenson pointed out in a New York Times article last year, hedge fund managers get a special tax break allowing them to pay lower taxes on their income than most Americans. That's right: a hedge fund manager is taxed at a lower rate than a New York school teacher. President Obama could have closed that loophole in the tax law by executive action, but he didn't.And then there's corporal punishment in the schools. Researchers are unanimous that beating children with boards is not good for them, and the United Nations has identified corporal punishment as a human rights abuse.In the waning days of the Obama administration, Secretary of Education John King, Jr. condemned corporal punishment in an open letter to the nation's school leaders. But why didn't King speak up sooner? Corporal punishment in schools is a wrong that Obama's Department of Education could have stopped with an administrative regulation. Why didn't it? And then there's the student-loan program, which has brought suffering to millions. According to the Government Accountability Office, the Department of Education garnished the Social Security checks of 173,000 student-loan defaulters in 2015, a practice that Senator Elizabeth Warren bitterly condemned. The amount the government collects each year is a pittance--about one eighth the amount Hillary Clinton spent during the 2016 election season. And most of the money the Feds collect goes to paying interest and penalties without reducing the debtors' loan balances at all.Senator Warren and Claire McCaskill filed a bill to stop the garnishment of student debtors' Social Security checks, but the measure never made it out of committee. Why won't Senator Schumer and Representative Pelosi get behind that bill? Who could decently oppose it?In fact, there are numerous noncontroversial things our Congressional representatives could do to ease widespread suffering among the nation's poorest Americans. But our Congressional representatives are not doing these things. Why? Two reasons. First, they don't want to do noncontroversial good things because that would mean sharing the credit with their political enemies.And second, Nancy Pelosi, Chuck Schumer, John McCain, Mitch McConnell and all our other bozo representatives don't work for us. They work for the lobbyists, their campaign contributors, and the global financial institutions; and that keeps them pretty busy.

Thursday, October 5, 2017

Last month, the Department of Education released its latest report on three-year default rates for the 2014 cohort of student borrowers. DOE reported a three-year default rate of 11.5 percent, up slightly from the Department's 2016 report.

A student-loan default rate of 11.5 percent doesn't seem so bad. After all, nearly 90 percent of the 2014 cohort are not in default.

But wait a minute. Instead of looking at default rates, let's look at repayment rates. How many people are paying off their loans?

It's not a pretty picture. A few days ago, the National Center for Education Statistics produced a report on student-loan repayment rates; and the NCES's findings are alarming. The report is packed with incomprehensible, technical jargon and far too many tables and appendices, but if you dig around in the report, you get to the heart of the matter.

Among borrowers who were first-time students in 1995-1996 (more than 20 years ago), less than half had paid off their loans by 2015. According to NCES, only 41.3 percent of the students in this cohort had paid off their loans 20 years after first entering postsecondary education.

What is the status of the other 59 percent? About 31 percent were still making payments in 2015, 13.8 percent had their loans in deferment, and 13.7 percent were in default.

In the 2003-2004 cohort of borrowers, only 23.5 percent had paid off their loans 12 years after beginning their studies. Three quarters of borrowers in this cohort were still making payments, had loans in deferment, or were in default.

As we would expect, student borrowers who obtained bachelor's degrees or higher had the best repayment rates. Nevertheless, in the 1995-96 cohort, only half of these people had paid off their student loans twenty years after they first enrolled in college.

The bottom line is this. By giving out deferments and encouraging student debtors to enter long-term repayment plans, the Department of Education has kept its official student-loan default rates artificially low. But the fact remains that almost 60 percent of a cohort borrowers who took out student loans in the mid-nineties had not paid off their loans 20 years later.

And remember, people in the repayment phase who aren't paying down their loans or who are making token payments are seeing their loan balances grow larger with each passing month. An individual who hasn't paid back his or her student loans after 20 years is probably never going to pay them back because the loan balance is out of control.

That should scare Betsy DeVos and her minions at DOE. But she is focused on propping up the for-profit college industry and not the appalling data that show that a majority of college borrowers cannot pay off their student loans even when given 20 years to do so.

Americans are accustomed to serial killers. According to the New York Times, mass shootings have occurred in the United States at the rate of more than one a day over the last 477 days.

We can sort these killers into discrete categories. Some are religious extremists--the Boston Marathon bombers, the Orlando shooter, the San Bernardino murderers. Some are disaffected young men: the killers at Columbine, Sandy Hook, and the Charleston, SC church.

And there is at least one more category: disaffected, older white men. Stephen Paddock,an affluent 64-year-old man, who killed or wounded more than 500 people in Las Vegas a few days ago, is the latest old white guy to commit (or at least attempt to commit) mass murder. Before Paddock, there was James Hodgkinson, a 66-year-old geezer from Illinois who shot a group of Republican congressmen while they were practicing for a charity baseball game. And don't forget John Russell Houser. Houser, a 59-year-old loner, opened fire in a movie theater in Lafayette, Louisiana, killing two people and injuring nine others before shooting himself.

What did these men have in common? All were older white men, all attacked complete strangers, and all committed suicide (or allowed themselves to be killed by the police). And I think it is fair to say that these three men had lost all sense of purpose as they entered old age.

Let's face it. Growing old is no fun. As we grow older, we realize we did not achieve all our dreams and that our time on earth is drawing to a close. We feel our strength and vigor ebb away as we hunker down for the last stage of life. Our regrets and mistakes loom larger and larger in our minds while our meager triumphs and happy times grow dim in our memories.

And as death approaches, we find we are not afraid. At times we almost long for death. This movie lasted too long; we want to see "The End" appear on our movie screens. And we don't give a damn who shows up at our funerals.

In a healthy culture, old people derive meaning and purpose from their families--especially their grandchildren. If they are fortunate, they are respected for their wisdom and are sought out for wise counsel. Some of us belong to civic organizations or take comfort from religious faith.

But in postmodern America, a lot of old white guys don't have any of that. They lost the families they started when they were young. Their jobs, which were obsessions when they were in their twenties and thirties, now seem tedious. They've lost all interest in religion and find religious people excruciatinglyboring.

And some of these old guys become nihilists; and some of them have guns.

I wish I believed the Stephen Paddocks of this world are the rarest of aberrations, that we will not see the likes of him again in our lifetime.

But I know differently. Our culture does not honor the old; it offers no solace to the elderly. The indignity of our approaching death reveals itself, the meaninglessness of existence becomes apparent; and some old men express their disappointment through murder.

The collapse of Corinthian Colleges and ITT Tech shined a light on the seedy for-profit college industry. Both for-profit college companies filed for bankruptcy under a cloud of accusations of fraud and misrepresentation.

Together, Corinthian and ITT Tech had more than half a million former students. Thousands of them filed so-called "borrower defense" claims, petitioning the Department of Education to forgive their student loans because they were defrauded by the institutions they attended. About 65,000 borrower-defense claims are now pending.

What to do? The Obama Administration prepared borrower-defense regulations that were scheduled to take effect on July 1, 2017; but Secretary of Education Betsy DeVos blocked their implementation, saying the rules would be rewritten through the "negotiated rule making" process. DeVos' decision will allow the for-profit industry a voice in reshaping the rules to their liking.

Why did DeVos block the Obama-era regulations? She said the regulations drafted by the Obama administration would allow students to get "free money" by having their loans forgiven. In other words, DeVos apparently assumes students who file fraud victims are themselves engaging in fraud by seeking debt relief.

This latest caper from DeVos' Department of Education tells us all we need to know about President Trump's least qualified cabinet appointee . Time and time again, DeVos has made decisions to benefit the for-profit colleges at the expense of students; and she has hired consultants who have worked in that sleazy industry.

Millions of people have borrowed money to attend overly expensive for-profit colleges only to receive educational experiences that are virtually worthless. Some were defrauded, some obtained degrees that did not lead to good jobs, and some just paid too much for substandard postsecondary programs. Unless these people obtain relief from their student-loan debt, they will never get on their feet financially.

The Obama administration's borrower-defense regulations were drafted to determine which for-profit students are fraud victims entitled to student-loan debt relief. In my mind, however, it is impossible to efficiently decide on a case-by-case basis which student borrowers are entitled to debt relief due to fraud. That would require hundreds of thousands of individual due-process hearings.

No, the only way to give worthy student-loan debtors a fresh start is through bankruptcy. Congress must amend the Bankruptcy Code to treat student loans like any other consumer debt.

If insolvent student-loan debtors were given reasonable access to bankruptcy, millions of cases would be filed and at least half a trillion dollars in debt would be wiped out.

A half trillion dollars in student-loan debt relief would be a big hit to the U.S. treasury, but let's face it. Millions of student loans will never be paid back. It would be far better for the overall national economy if student borrowers were given a fresh start rather than be forced into 20- and 25-year repayment plans in which borrowers make token monthly payments that don't even cover accruing interest.

DeVos either doesn't understand the magnitude of the student-loan debt crisis or she doesn't care. Either way, she is a disaster who needs to be cashiered.

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About Me

Richard Fossey is a professor at the University of Louisiana in Lafayette, Louisiana. He received his law degree from the University of Texas and his doctorate from Harvard Graduate School of Education. He is editor of Catholic Southwest, A Journal of History and Culture.